With manufacturing costs on the rise in China, many companies have sought to establish their operations in other regions. In recent years, Vietnam has been an attractive alternative for MNCs seeking low labor outlays. Is there, however, another country that is set to become a prime foreign investment hot spot? James Evans recently provided insight into this question, and discussed whether Cambodia could be “the next Vietnam,” as part of a virtual roundtable discussion in the October 2013 edition of Asia IP.
Asked whether Cambodia is a viable candidate to host some of the factories leaving China, James said the country “is a prime candidate.” One point to note, however, is that “the size and population difference between China and Cambodia are so great that the Cambodian economy can only accommodate a small fraction of such vast investment realignment.”
On the question of Cambodia’s openness to foreign direct investment, James says, “The Cambodian Government has been receptive.” He goes on to say the government has promulgated “generous policies of incentives such as a nine-year tax holiday and full import duty exemption” to attract foreign investors. In addition, “One-hundred percent foreign equity ownership is allowed, and only a few industries are closed to foreign investment.”
Commenting on Cambodia’s preparedness to undertake the sort of manufacturing work that has been done in China recently, James says that “Investors have seen a marked improvement in infrastructure, but most of this progress is confined to major urban centers such as Phnom Penh and Siem Reap.” Of similar improvement, he says, “there has been a 40% increase in education and literacy rates in the past seventeen years.” Despite these advancements, there are still numerous areas that need to be developed. For example, he says, “human resources capacity is weak in all sectors, and levels of access to supplies and transport infrastructure differ greatly between urban and rural areas.” Not to mention, there are “significant corruption issues that are setting back the country.”
On the issue of intellectual property enforcement and activity in Cambodia, James says that despite there being “no sophisticated legal infrastructure in place,” there has been an “increase in the number of trademarks filed in Cambodia over recent years.” Also, he says, “Cambodia is planning to join the Madrid System for the International Registration of Marks by 2015,” which should “make registration much easier, quicker, and cheaper.”
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